Obesity remains a serious health problem and it is no secret that many people want to lose weight. Behavioral economists typically argue that “nudges” help individuals with various decisionmaking flaws to live longer, healthier, and better lives. In an article in the new issue of Regulation, Michael L. Marlow discusses how nudging by government differs from nudging by markets, and explains why market nudging is the more promising avenue for helping citizens to lose weight.

Two long wars, chronic deficits, the financial crisis, the costly drug war, the growth of executive power under Presidents Bush and Obama, and the revelations about NSA abuses, have given rise to a growing libertarian movement in our country – with a greater focus on individual liberty and less government power. David Boaz’s newly released The Libertarian Mind is a comprehensive guide to the history, philosophy, and growth of the libertarian movement, with incisive analyses of today’s most pressing issues and policies.

Search form

Archives: 10/2008

Some in the media (or at least Keith Olbermann at MSNBC) are ridiculing Sarah Palin’s recent answer to a third-grader’s question of “What does the Vice President do?” The part of her response that seems to have people in a tizzy is the following: “[A] Vice President has a really great job, because not only are they there to support the President agenda, they’re like a team member, the teammate to that President. But also, they’re in charge of the United States Senate, so if they want to they can really get in there with the Senators and make a lot of good policy changes… ” (emphasis added). Haha, Ms. Caribou Barbie Palin, the wags chortle, don’t you know that the Vice President is only mentioned four times in the Constitution (two of which mentions are in later amendments) and has no power but to break ties in the Senate?

Well, that’s right, except it’s not. While true that the only formal power the Constitution (specifically Article I, Section 3) gives the VP is to cast the deciding vote when the Senate is deadlocked, the Constitution is understandably silent as to what else the VP can do with his or her time. Yet nobody would deny that Dick Cheney has been an extremely powerful figure, and not because of any explicit powers but because he has aggressively pushed the Bush Administration’s agenda and lobbied senators (particularly Republicans). So sure, the VP can have a big effect on policy.

Moreover, the VP is the “President of the Senate,” which is sort of like being in charge – if indeed anyone is in charge of that motley group of wannabe presidents. This isn’t “in charge” the way a president or CEO is “in charge” – the VP can’t fire senators or force them to vote a given way or veto their bills – but I don’t think anyone can reasonably construe Palin’s comments to imply that. The most reasonable construction is that she was trying to explain in her own words what being “President of the Senate” means, and could’ve done a lot worse than characterizing it as being “in charge.”

You can read more on this issue in this CBS News posting, which further quotes my thoughts on the matter.

New York mayor Michael Bloomberg, who spent $158 million on his two elections, now thinks he should stay in office despite the city’s two-term limit. So far it’s much cheaper–he’s just pressuring all the civic groups and charities in town that have received donations from him, or from the taxpayers, to get themselves down to City Hall and testify to his indispensability in a time of financial crisis. The voters have twice endorsed term limits, but the mayor doesn’t see any need to ask them again; he wants the City Council to overrule the voters.

But the striking thing about the plutocrat mayor is the way he’s using his personal wealth–and the city’s tax dollars–to pressure people to support his bid to stay in office. TheNew York Times reports:

The mayor and his top aides have asked leaders of organizations that receive his largess to express their support for his third-term bid by testifying during public hearings and by personally appealing to undecided members of the City Council. …

The requests have put the groups in an unusual and uncomfortable position, several employees of the groups said. City Hall has not made any explicit threats, they said, but city officials have extraordinary leverage over the groups’ finances. Many have received hundreds of thousands of dollars from Mr. Bloomberg’s philanthropic giving and millions of dollars from city contracts overseen by his staff.

Mayor Bloomberg showered cash on key City Council members with the power to kill a term-limits extension bill in the last year.

Members of the council’s Government Operations Committee have received millions from Hizzoner’s slush fund, a once-secret pot of taxpayer money the mayor doles out to favored lawmakers for their pet causes….

Five members of the committee secured $3.1 million from the $5.3 million stash in Bloomberg’s 2008 budget. Only three other council members received funds from the mayor in the last year.

And the New York Daily News noted that everyone working for Bloomberg at the City Council hearings is on Mayor Mike’s payroll one way or another:

There was the mayor’s legal counsel and the city’s corporation counsel, both paid with tax dollars, testifying that Bloomberg can and should get another term.

There were aides from the mayor’s Community Assistance Unit, who rounded up pro-Bloomberg speakers from the community and religious and civic groups they work with all day long - many of which thrive on city grants.

There were the dozens of “Ready, Willing and Able” guys from the Doe Fund, which gets funding from the city - and used its vans to bring people to the hearing.

No doubt it’s all just chump change compared to another $80 million if he wins the right to run again.

Personally, if the Council does decide to give the mayor another term, I hope they do just that. Don’t get rid of term limits. Just do like the Romans used to do in an emergency. Name Bloomberg “dictator,” an extraconstitutional position with extraordinary authority but limited duration. Then you keep the rules, you just make an exception. And I’m sure Bloomberg would be willing to addressed as Dictator for the duration of the emergency powers.

A paper by three Minneapolis Fed economists is making the rounds – disputing any funding crisis for non-financial corporate firms. IMHO, this is a very disingenuous paper. All of these so-called myths are really non-myths. Basically, the paper’s focus on “bank lending” is mistaken. Focusing on total borrowing by non-financial sectors shows the accurate picture.

The financial market crisis is in the non-bank financial sector, not in the banking sector. And the authors say (correctly) that the majority (80 percent) non-financial sector borrowing is not from banks. So why focus on bank lending to the non-financial firms to see if there’s a credit crunch?

Myth 2. Interbank lending is essentially nonexistent.

If that’s not true, so what? (See response to Myth 1.) Banks are more tightly regulated by the Fed (compared to non-bank financial companies by the SEC). So banks did not hold the riskiest mortgage backed securities (although they originated and sequestered such assets in off-balance sheet entities and “adverse selected” the best ones for their own portfolio, selling the rest to non-bank financial and other firms). So, again, the banking sector is not where the financial market crisis occurred – it happened in the non-bank financial sector.

But Federal Reserve Board data on total commercial paper borrowing by non-financial sectors took a huge hit in the 2nd quarter of 2008 (see Flow of Funds, Table F.2 from release Z.1 September 18, 2008, line 3). Thus, it’s not surprising that bank credit to non-financial companies may be increasing: Those companies may be drawing more heavily on their lines of credit with banks because non-bank sources of borrowing are constricted. So, where’s the mystery?

Myth 4. Banks play a large role in channeling funds from savers to borrowers.

Again, non-bank financial (and other) companies supply the overwhelming share of non-financial sector borrowing. And the non-bank financial sector is where the financial market crisis is occurring. So, there IS a funding crisis for non-financial firms. Get with it, Minneapolis Fed!

The following comes from a recent Health Affairs article by Katherine Baicker and Amitabh Chandra:

Insuring the uninsured will give them access to the sort of health care that everyone else receives: a combination of valuable care, overuse of some costly interventions with little proven benefit, and underuse of some vitally important therapies–care that is sometimes coordinated but often fragmented. This is better than no care, but it highlights the problem of collapsing the entire debate about U.S. health care reform down to the issue of uninsurance: health insurance does not guarantee good health care.

I would have added the added potential for harmful care, but the point is well-made. Read the whole thing.

I wrote here a few weeks ago about a plausible argument that the 9/11 attacks were succeeding in that they drew our nation into destabilizing overreaction. Though I assume only the best of intentions on the part of our political leaders, their massive expenditures on war and homeland security have left the country in a weaker fiscal position and less able to deal with the recent upheaval in investment banking, credit, and the stock market.

[Web commentary] posted by Taliban or al-Qaeda-allied groups in recent days [has] trumpeted the global financial crisis and predicted further decline for the United States and other Western powers. In language that was by turns mocking and ominous, the newest posting credited al-Qaeda with having lured Washington into a trap that had “exhausted its resources and bankrupted its economy.”

I’m still quite sure that the United States is not destabilized and in economic collapse, but we’re quite a bit worse off economically than we could have been had we responded strategically to terrorism rather than just reacting.

20-20 hindsight? Yes! My purpose is to turn these lessons into foresight.

The decades long battle over what constitutes a “small business” for purposes of government contracting set-asides (and subsidies for that matter) continues in today’s Washington Post. Once again, it appears that the federal government has been negligent in making sure the “big” guys aren’t swiping slices of the “small” guys’ cheese. Oh dear.

With regard to set-asides, regardless of who gets the government contract, taxpayers lose because they foot the bill. Because set-asides effectively limit the competition for a government contract, taxpayers can end up paying even more – especially when economies of scale would have allowed a larger business to offer a lower-cost alternative. Thus, I had to chuckle at the bereaved “small” defense contractor cited by the Post who bizarrely claims that these set-asides “keep down the cost to the taxpayers.”

Not to be outdone, the ever-excitable defender of small business set-asides, Lloyd Chapman, told the Post that the economy has been damaged by small businesses not getting their “fair share.” Lloyd heads up a group called the “American Small Business League,” which sounds innocuous until one discovers that it’s just another special-interest outfit fighting to secure a suckling position on the federal underbelly.

The federal government’s flagship promoter of the small business plight, the Small Business Administration (SBA), has been “helping” small businesses since the 1950s. However, Cato adjunct scholar, Dr. Veronique de Rugy, has found that “no more than 1 percent of [all] small business loans each year are SBA loans. The private sector finances most loans without government guarantee and, hence, the SBA is largely irrelevant in the capital market.” Moreover, because SBA financed loans have below market rates, small businesses who aren’t subsidized by the government are placed at a competitive disadvantage. (Read de Rugy’s entire piece here.)

So how does a bureaucracy that is a detriment to the interest it is supposed to promote still alive? The simplest reason is that, like thousands of other unnecessary government programs, the SBA has developed a vocal constituency. The small minority of businesses on the SBA dole obviously have an interest in its survival. Banks lobby for the SBA’s existence because SBA-backed loans guarantee lenders up to 85% repayment in case of default (i.e., SBA loans represent welfare for bankers).

Historian Jonathan J. Bean touched on additional reasons for SBA’s survival during his 2006 testimony before a Senate subcommittee hearing on the agency. The context is the Reagan administration’s failed attempt to abolish the SBA in the 1980s (click here for entire testimony):

“To a large extent, the SBA is a “creature of Congress.” Why was Congress so interested in the SBA? Many members were sincerely interested in small business issues. Others used their committee membership to strengthen ties with the business community. The SBA was a useful conduit for the constituent work of the Small Business Committees, a dumping ground for politicos, and a “petty cash drawer” for the pet schemes of Congress. The agency’s extensive field structure served many congressional districts; the field directors were “often as loyal to their district Congressman as to the agency.” It is little wonder, then, that Congress was so fond of the SBA.”

Set-asides and subsidies aren’t good for small businesses – they’re only good for politicians and taxpayer-dependent special interests. If Congress really wants to help, it should drastically reduce the tax and regulatory burden that inhibit a small business’s ability to compete and prosper. Heck, just doing away with the SBA would be a plus.